Inequality in Latin America: Better, But Still Terrible

Latin America, after many years of stagnation, has recently been held up as a model for reducing inequality. Yet as a paper from three World Bank economists suggests, the progress of the last 15 years or so masks a failure to address the major problem of those living just on the edge of poverty–and therefore vulnerable to falling back below the official line.

The report notes that “although the decline in poverty and inequality has been impressive, Latin America remains one of the most unequal regions of the world.”

As for the key sources driving poverty and inequality reduction in the region, these include government transfers and remittances as well as real wage increases for lower-income workers.

“The most equal countries in Latin America – Argentina and Uruguay – are still more unequal than the least equal among all of the non-Latin American OECD countries,” the authors write, referring to the 34 countries that comprise the Organization for Economic Cooperation and Development.

Since 1995, extreme poverty, defined as individuals earning less than $2.50 per day, has been cut in half, to 13% from 26%, according to World Bank figures. The drop comes with a major caveat: “The largest segment of the region’s population still remains vulnerable to falling back into poverty, with 40% of the population living with incomes above the poverty line” of $4 per day.

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